UK finmin ready for ‘hard negotiation’ with Pfizer Pfizer’s record of job cuts fuels worries in Europe, US

Britain is ready for “hard negotiation” to ensure Pfizer sticks to specific promises on jobs and science under the US drugmaker’s proposed takeover of AstraZeneca, its finance minister said. “I think it would be extraordinary not to engage with AstraZeneca or Pfizer,” George Osborne told BBC radio on Saturday. He stressed Britain was an open economy that had benefited “enormously” from past investment by foreign companies, such as Tata Motors and Nissan in the car industry, and AstraZeneca itself had grown by taking over foreign firms. Although the country’s second-biggest drugmaker AstraZeneca has rejected a $106 billion approach from Pfizer in what would be the largest foreign takeover of a British company, the US group is expected to continue its pursuit. Osborne said there was there was “a lot of speculation about another bid coming”.

Pfizer is currently weighing its next move, which could be a higher offer next week. “We are an open economy, we benefit from that. But our national economic interest when it comes to a very big takeover like this is who’s going to be providing the science and the jobs and the manufacturing,” Osborne said.
Pfizer’s past record of cutting jobs after swallowing smaller rivals such as Wyeth, Warner-Lambert and Pharmacia has stirred up a political storm and fuelled concerns among scientists about the impact of any deal on British science. Pfizer has already given a five-year commitment to complete AstraZeneca’s new research centre in Cambridge, retain a factory in the northwestern English town of Macclesfield and put a fifth of its research staff in Britain if the deal goes ahead.

But the US firm has also said it could adjust its promises if circumstances change “significantly”, prompting demands for more water-tight pledges. Osborne’s comments follow a call by Deputy Minister Nick Clegg on Friday for binding commitments from Pfizer. While most scientists, trade unions and the opposition Labour Party have lined up against the Pfizer bid, business leaders are worried that any political moves to stop it going ahead could damage British interests. “If the British government intervenes, it will send the worst possible signal to global business and repudiate a three-decade commitment to a free and open economy,” Simon Walker, director general of the Institute of Directors, wrote in an opinion piece in the Times newspaper on Saturday.

“It would invite retaliation from other countries where British businesses have taken over major companies.” The British government has not ruled out the idea of subjecting the Pfizer takeover plan to a formal “public interest test”, although competition lawyers believe the European Commission would probably block any such attempted intervention. US drugmaker Pfizer fought back on Saturday against criticism that its planned takeover of rival AstraZeneca would damage Britain’s science base by saying strong UK research was a key reason for the deal. Given its record of big job cuts after past acquisitions, the US group has come under fire in Britain, the United States and Sweden as it weighs its next move to buy AstraZeneca, which could be a sweetened offer next week.

Chief Executive Ian Read, who is due to appear before two panels of British lawmakers on May 13 and 14, said in a video that the $106 billion deal was a “win-win” for shareholders and society, and merging the two firms’ research would be “easy”. The suggested deal would be the largest foreign takeover of a UK company and has provoked a political storm in Britain, with the government seeking binding commitments to protect skilled jobs and scientific research. Two US state governors with large AstraZeneca workforces have also joined the fray, while the Prime Minister of Sweden —where AstraZeneca has half its roots — has expressed concerns.

The furore in Britain is Read’s top priority ahead of his expected grilling by British lawmakers at separate parliamentary committee hearings next week. Read did not make any fresh pledges on British jobs in his latest comments, which were posted on the US company’s website, but he said tapping into AstraZeneca’s research and development capacity was an important reason behind the deal. “When we looked at AZ, we liked their science. We liked where their science is being done, which is in the UK, and we know we have good science in the UK in the Cambridge, Oxford, London and other universities,” he said. He dismissed suggestions from AstraZeneca’s Chief Executive Pascal Soriot that a merger would be disruptive and could damage the development of a series of experimental drugs currently in clinical testing.

“The integration of the two scientific bases, in my opinion, will be very easy,” he said, arguing that Pfizer’s system gave substantial autonomy to scientific leaders within specific diseases areas. Pfizer has already given a five-year commitment to complete AstraZeneca’s new research centre in Cambridge, retain a factory in the northwestern English town of Macclesfield and put a fifth of its research staff in Britain if the deal goes ahead. But the US firm has also said it could adjust its promises if circumstances change “significantly”, prompting demands for more water-tight pledges. AstraZeneca has rejected Pfizer’s approaches, arguing its cash-and-shares offer of 50 pounds per share significantly undervalues Britain’s second-biggest pharmaceuticals company, which has a bright future as an independent business.

An AstraZeneca spokeswoman said the group remained focused on delivering its pipeline of promising new drugs for cancer and other diseases and had no comment on Read’s video. The Pfizer CEO did not shy away from the fact the proposed deal would lead to some job losses and that a plan to re-domicile the enlarged company in Britain would cut its taxes, but he said such things were necessary to improve efficiency. “Governments are all around the world pressurising the industry to produce products of higher value and with more productivity, at lower cost,” he said. “So one way of doing that is to consolidate and is to take out overlapping functions.”

Under British takeover rules, Pfizer has until May 26 to make a firm bid for AstraZeneca or walk away.
That puts pressure on Read and his team to get a deal signed quickly and many investors believe Pfizer is likely return next week with an improved offer of more than 53 pounds a share — including a larger cash element — in an attempt to get AstraZeneca to the negotiating table. “There is a lot of speculation about another bid coming,” Osborne said in a BBC radio interview. Pfizer has a tarnished reputation in Britain after it announced plans in 2011 to shut a major drug research site in Sandwich, southern England, where Viagra was invented, with the loss of some 1,700 jobs. But the company is also working with many academic scientists in the country and on Friday signed a deal with top universities on research into rare diseases. (RTRS)